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How much is the Carrying Amount of the Lease

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Question - On January 1, 2020, MECQ Company leased to Wuhan Company a Lab Equipment in a Sales Type Lease with the following details:

Annual Rental payable 1,200,000

Lease Term and Useful Life 5 years

Cost of Machinery 2,500,000

Guaranteed Residual Value 250,000

Implicit Interest Rate 12%

Payment starts on January 1, 2020

Required -

1. How much is the Value of Net Investment (Sales) of the Sales Type Lease?

2. How much is the Gross Profit of the Sales Type Lease?

3. How much is the Carrying Amount of the Lease as of December 31, 2021?

4. How much is the Interest Income for 2020?

Reference no: EM132561421

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